Latest Studies

Latest Studies - December 2019

The increase in merger and acquisition (M&A) activity over the past several years is driving substantial growth in demand for M&A insurance products, according to this Aon report. Aon found that 3,200 deals were transacted globally using warranty and indemnity (W&I) insurance in 2018. (W&I is also known as reps and warranties, or R&W). The market value for transactional liability solutions reached $2.3 billion in 2018, a 35 percent increase from 2014. While W&I insurance remains the largest product by premium volume, buyers and sellers are also looking to tax insurance, litigation and contingency insurance and customized products that include environmental or cyber policies. The report also points out a growing trend of demand for U.S.-style W&I policies in Europe, driven by U.S. buyers trying to inject U.S. terms into European sale agreements. Full report

This report is the result of Allianz Global Corporate and Specialty's analysis of more than 50,000 aviation insurance industry claims between 2013 and 2018 worth a total of over $16.3 billion. Collision/crash incidents account for more than half the value of all claims (57 percent), equivalent to $9.3 billion. Despite the worldwide aviation sector’s continuously improving safety record, in recent years the number of dollars paid in claims outstrips total insurance premiums. The high volume and cost of insurance claims is due to more expensive repairs and engine claims, damage from foreign objects, ground collision incidents, slips and falls, fleet groundings, misfuelling incidents and liability awards. Loss of control in flight is the most frequent cause of fatal accidents. Collision/crash claims also incorporate incidents such as hard landings, bird strikes and runway incidents such as incursions and excursions. The analysis shows there have been 470 runway incidents resulting in claims across five years, causing over $883 million in damages. The average runway claim is around $1.9 million. The report contains many more details about aviation claims and the state of aviation safety. Full report.

United States civil aviation deaths increased from 347 in 2017 to 393 in 2018 (up 13 percent), according to preliminary statistics released by the National Transportation Safety Board. The nation’s first commercial airline passenger fatality since 2009 occurred in 2018, when a passenger on a Southwest airliner was killed in connection with an engine failure. The overwhelming majority of aviation fatalities involve small private airplanes. 381 people were killed during general aviation operations (compared to 331 the year before). Accidents involving charters, air taxis, air tours and medical services (when a patient is on board) claimed 12 lives (down from 16 in 2017). News release

This article discusses how Americans’ drinking, drug use and despair have led to three straight years of declining life expectancy after a half-century of gains. The analysis, which first appeared in JAMA showed that life expectancy decreased from 2014 to 2017, particularly among midlife Americans. The author notes that research has shown that these trends date to the 1980’s, and increased during the 1990’s, when economic disparities became starker, particularly between rural, less-educated populations and urban, better-educated populations. This decline in life expectancy continues despite some chronic disease rates falling, including heart disease and HIV. The article also notes that obesity rates have risen, and that the opioid crisis has greatly contributed to this decline in life expectancy. Additionally, social isolation is mentioned as a contributing factor to the decline in life expectancy. An editorial that accompanies the JAMA study cites research that found social isolation increased the risk of death by 29 percent. Full text

This report discusses large-loss fires (defined as fires which result in a $10 million or more loss in 2009 dollars) in the United States in 2018. There were 36 large-loss fires in 2018, the highest number of such incidents since 2007 when there were 47 large-loss fires. The large-loss fires of 2018 resulted in nearly $13 billion in direct property damage and losses, the highest figure since the $34.38 billion in losses experienced in 2001, which included losses associated with the attacks of 9/11. This makes 2018 the second-costliest year since the large-loss study started in 1975. The three largest-loss fires in 2018 were all wildfires that occurred in wildland/urban interface (WUI) communities in California. The Camp Fire, the Woolsey Fire, and the Carr Fire were recognized as the second-, third-, and twelfth-costliest wildfires in U.S. history, respectively. Overall U.S. fire departments responded to an estimated 1.3 million fires that resulted in estimated losses of $25.6 billion in 2018. Many of these fires were small or resulted in little or no reported property damage. The report includes many other facts about fire losses in 2018. Full text

This report, co-produced by Lloyd's, explores several scenarios involving a hypothetical cyberattack called Shen on major ports across the Asia Pacific. An estimated $110 billion in losses could occur in an extreme scenario in which 15 ports are infected and their cargo databases rendered inoperable. An attack of this scale would cause substantial economic damage to a wide range of business sectors globally due to the inter-connectivity of the maritime supply chain. Transportation, aviation and aerospace sectors would be the most affected ($28.2 billion of economic losses in total), followed by manufacturing ($23.6 billion) and retail ($18.5 billion). Productivity losses would affect each country that trades with the attacked ports. Asia would be the worst affected region, set to lose up to $27 billion in indirect economic losses, followed by $623 million in Europe and $266 million in North America. Insurance would only cover 8 percent to 9 percent of the economic losses, demonstrating a high level of underinsurance for this type of cyberattack. Full report

A remarkable increase in the number of earthquakes near the town of Pecos in West Texas over the last 20 years can be linked to petroleum production and fluid waste disposal according to this study by University of Texas scientists. The number of earthquakes jumped from 19 in 2009 to 1,600 in 2017 alone. The scientists documented more than 7,000 earthquakes in total, most of them so small that only the seismic instruments were able to detect them. The study found that for the Pecos events annual seismicity rates increased along with annual volumes of petroleum production and fluid waste disposal, suggesting a causal link. Analysis of seismograms collected by the EarthScope Transportable Array indicates the 2009 earthquakes had focal depths of 4.0‐5.2 km below sea level, within or just below strata where petroleum is produced and/or wastewater is injected. The largest earthquake to date was magnitude ML3.7. However, the recent high activity rates suggest that greater magnitudes may be possible. Full text

This report concerns the increase in social inflation, a term that refers to societal trends impacting changes in the tort system through which most insurance liability cases are settled. Better funded plaintiffs’ attorneys and rising jury awards are contributing to the "social inflation" factor of liability loss costs. Social inflation appears to be moving from commercial auto to other casualty lines (notably general liability, D&O and medical malpractice). Although rates for commercial lines have increased they might not keep pace with social inflation. The report mentions that opioid litigation and reviver statutes (which allow individuals to file claims for older sexual abuse cases) could put more stress on adverse reserve development. Full Report

The 2017 and 2018 wildfire seasons were a catastrophic shock to communities, legislators, and insurance companies. This was most evident in California, which suffered the largest and most destructive wildfires in state history. The aftermath of these disasters has led to the question of whether catastrophic wildfires will be the new normal for California and other fire-prone states and, if so, what can be done to mitigate them? This white paper discusses some of the ways in which insurers are educating their customers about wildfire risks, with the goal of creating resilient communities in high-risk areas and fostering the development of new tools and techniques to help build a more wildfire-resilient world. Full report